Socialist Hollande ousts Sarkozy

The face of of the newly-elected French President Francois Hollande appears on a giant screen to announce the winner of the 2012 French presidential elections at the Rue de Solferino Socialist Party headquarters in Paris, May 6.
Reuters

French President
Nicolas Sarkozy
has become the latest European leader to lose his job since the outbreak of Europe’s sovereign debt crisis, failing to defeat Socialist candidate François Hollande in the country’s decisive second round presidential election.

Meanwhile, Greece is facing a new era of political stalemate after the country’s two ruling parties, who had committed to painful austerity reforms, sustained heavy losses.

To retain government, they look set to need to find a third coalition partner from one of several opposition parties, all of whom are opposed to the austerity measures Greece agreed with its creditors as a condition of staying within the euro zone.

In a historic win for the French Socialists, Mr Hollande will take leadership of Europe’s second-largest economy at a critical juncture in Europe’s debt crisis.

Austerity measures designed to cut government debt and resolve doubts about the solvency of many European countries have pushed Italy and Spain deep in recession and the weakness is spreading to the healthiest part of Europe’s economy, Germany.

Mr Hollande, who won 51.9 per cent of the vote according to early estimates, campaigned heavily on renegotiating Europe’s austerity pact to make it more focused on finding ways to expand economies rather than simply cutting public debt.

Many of his demands have been ruled out by German chancellor
Angela Merkel
and Mr Hollande’s election risks driving a wedge between the two countries that have traditionally ruled over the 17-country euro zone.

Speaking in the town of Tulle, capital of the department which he was represented for most of the last 24 years, Mr Hollande declared his mission would be to find ways to help Europe grow out of the debt crisis.

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“Today, as I feel responsible for the future of my country, I’m full aware of the fact that the eyes of Europe are upon us," he said. He would immediately push for the building of more infrastructure as well as other inventions to boost employment, he said.

He also said France would meet its promises to lower its own spending.

“We need to produce more to overcome the crisis," he said. “We need to reduce our deficit to master our indebtedness. We need to protect our social system to guarantee that everyone will have access to public services."

The election outcome is not expected to affect financial markets when they open, with the Socialists’ win consistently predicted in opinion polls. However markets will be closely following the make-up of Greece’s next government.

The two main parties, New Democracy and Pasok, need to win at least 40per cent of the vote to have a hope of forming a coalition government. Early exit polls suggest their combined vote will instead be between 31 per cent and 37 per cent.

That would force New Democracy and Pasok to form an alliance with one or more of the four other parties expected to be elected to parliament, all of whom campaigned against continuing with the memorandum of budget cuts and tax rises wo which Greece agreed with the European Commission, the European Central Bank and the International Monetary Fund in return for a €170 billion ($218.3 billion) bailout.

Should Greece’s next government be unable to continue its promised reforms, the bailout funds could be cut off and the country may be forced to leave the euro zone.

One of Mr Hollande’s critical first tasks in office will be to come to an agreement with Germany on the next steps in managing Europe’s debt problems. The president-elect was expected to call Dr Merkel, who had backed Mr Sarkozy in the elections, on Sunday.

Socialist MP Jean-Marc Ayrault told the French media earlier: “He will talk with the German chancellor because in that exchange lies the key to Europe’s recovery, redirecting Europe towards growth, competitiveness and protection."

In addition to changing tack on Europe’s austerity drive, Mr Hollande campaigned on higher taxes on banks and high earners, unwinding Mr Sarkozy’s pension reforms so workers who have paid taxes for at least 41 years can retire at 61, and employing 60,000 more teachers.

While Mr Hollande advocates adding a plan for growth to Europe’s crisis management plan he has also pledged to balance France’s budget by 2017. The French government has not run a surplus since the late 1970s.